SGFL is in the business of supplying forgings for auto, oil, petrochemicals, breweries and other sectors. The company is raising funds by an IPO with which it hopes to garner 15 crores. The purpose of the IPO is to finance its expansion and enhancement in capacity. The total outlay estimated is 32.7 crores and the company plans to take a term loan of about Rs. 12.4 crores plus use its internal accruals along with the funds from the IPO to finance these plans.
The company is offering its shares at Rs. 30 which translates into a P/E ratio of 5.5 times based on the net profit of Rs. 2.16 crores for the nine month period ending December 2004.
The manufacturing facility is located in Thane Creek Industrial area in Navi Mumbai and they have a capacity of 11000 tpa. The company derives a large part of its revenue from exports with the percentage being as high as 80%.
The reason for this is the strict environmental laws in the west and the low cost of manpower in India. Both of these factors combine together to make India a hot destination for outsourcing of forgings and the business is hotting up. Also it enables the Indian companies better utilization of their capacities and increase profitability. This mean that the companies have spare capacities and without spending extra on capital expansion or machinery they can produce extra just by incurring variable costs.
The company is collaborating international organizations to market their products abroad. The company has been exporting its products to countries like US, UK, Canada and Middle East. The products have met the quality norms in these countries.
The company however is small in size with the largest player Bharat Forge having 25% market share and a market capitalization of over 5100 crores.
